Chancellor George Osborne is looking at 'closing a loophole that allows senior public officials to avoid thousands of pounds in tax by being paid through one-man companies' according to a national newspaper.

The Mail on SUnday says that Mr Osborne has entered the debate after dozens of civil servants were exposed as exploiting the arrangement. It also reports that this includes at least two senior officiers from HM Revenue and Customs.

A source within Mr Osborne's office told the Mail on Sunday: "We are rooting out the inappropriate use of private service companies for people who are effectively working as employees. We are going to put a stop to it.

"It can be traced back to abuses that grew up under Labour, but it is up to us to clean it up."

The Mail on Sunday reports in detail on the HMRC cases, where at least one of them, if not both, appear to be the classic 'Friday-to-Monday' scenarios. The so-called 'Friday-to-Monday' issue was the genesis of the original IR35 legislation which was aimed at preventing employees who left work on the Friday only to return as a contractor on the Monday operating through their own limited company.

HMRC was reported as saying that it had "at all times observed its own rules about the use of contractors and provision of services through personal service companies."